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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Dominick who wrote (3190)	12/24/2001 10:41:27 AM
From: Dan Duchardt	Read Replies (2) of 5205

Dominick, Without seeing the full context of Bernie Schaeffer's guidelines I certainly wont launch a strenuous rebuttal. I do recall reading something on his web site that suggests he does not like the usual definition of volatility used by most people, and he may have good reason for that. Apparently he prefers a "Standard deviation" calculation based on all the stock prices (rather than based on price ratios as in the ususal definition). His (high-low)/(high+low)/2) is really just a fractional range calculation and tells you nothing about how the stock moved within that range. The usual definition of volatility, and the price based standard deviation calculation are attempts to measure those moves within that range to enable one to predict the movement over any time frame. The problem with the usual definition is that it is insensitive to trend. A strongly trending stock can have very little volatility. Bernie's range calculation is probably a better indicator in cases like that. The square root of time factor is common to both approaches and is reflected in the pricing models. Dan

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